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Category: Consumer & Inflation

Maintaining a low and stable inflation rate has become one of the challenges in the macroeconomic management of most countries.   Among others, Malaysia has a very unique experience in terms of inflation.  The economy has experienced episodes of high (1973-1973, 1980-1981) and low (1985-1987) regimes of inflation, and was able to contain low and stable inflation during the high economic growth period of 1988-1996. The objective of this study is to identify important factors that contribute significantly to inflation in Malaysia.  This study also aimed to examine the possible existence of international and intra-ASEAN inflation transmission to Malaysia.  The analysis is carried out based on the time-series approach of multivariate cointegration, vector error-correction modeling, impulse response functions and variance decompositions.  The empirical results of this study show that external factors such as exchange rate and the rest of ASEAN's inflation are relatively more important than domesitc factor in explaining Malaysia's inflation.

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Category: Competitiveness

The paper uses two panel unit root procedures to test stochastic convergence for 14 states in Malaysia, for the period 1960-2003.  Stochastic convergence implies that idiosyncratic country-specific factors cannot explain long-run economic growth, and that shocks to relative regional real per capita Gross Domestic Product (GDP) have temporary effects. In this case, real per capita GDP differentials between states are stationary. Thus, stochastic convergence implies that regional differences across states are not persistent, and that long-run movements in a state's GDP are driven by common technology shocks. The result indicates that the null hypothesis of no convergence in GDP per capita across the 14 states in Malaysia can be rejected. From the policy perspective, this study suggests that previous regional development policies were able to reduce income disparity between the 14 states in Malaysia.  Source: ICFAI Journal of Industrial Economics; May2008, Vol. 5 Issue 2, p21-30, 10p.  Authors: Habibullah, Muzafar Shah & Sivabalasingam, V.

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Category: Competitiveness

Of the countries affected by the recent economic crisis in East Asia, Malaysia has attracted particular attention. Malaysian policymakers have consistently flouted conventional wisdom about the most appropriate ways of managing the crisis, in particular, and national economies, more generally, in an era characterised by increased international integration, both economic and political. Not only has Malaysia, under the leadership of its Prime Minister, Datuk Seri Dr. Mahathir Mohamad, refused to adhere to the neoliberal orthodoxy of liberalisation and financial opening, but the Malaysian government embarked upon a systematic counter-offensive designed to mitigate the influence of external economic forces and retain a degree of national policy autonomy. Author: Beeson, Mark. Publication: Pacific Affairs, Sep 22, 2000.

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